Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 0 - no response to price change






2. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






3. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






4. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






5. Es = (%dQs) / (%dPrice)






6. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






7. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






8. Two goods are consumer substitutes if they provide essentially the same utility to consumers






9. MUx / Px = MUy/Py or MUx/MUy = Px/Py






10. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






11. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






12. When firms focus their resources on production of goods for which they have comparative advantage






13. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






14. Entry of new firms shifts the cost curves for all firms upward






15. The sum of consumer surplus and producer surplus






16. TR = P * Qd






17. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






18. The difference between total revenue and total explicit costs






19. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






20. Entry of new firms shifts the cost curves for all firms downward






21. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






22. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






23. A good for which higher income increases demand






24. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






25. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






26. Occurs when LRAC is constant over a variety of plant sizes






27. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






28. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






30. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






31. Ed > 1 - meaning consumers are price sensitive






32. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






33. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






34. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






35. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






36. AVC = TVC/Q






37. A good for which higher income decreases demand






38. The total quantity - or total output of a good produced at each quantity of labor employed






39. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






40. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






41. Models where firms are competitive rivals seeking to gain at the expense of their rivals






42. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






43. Costs that change with the level of output. If output is zero - so are TVCs.






44. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






45. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






46. The most desirable alternative given up as the result of a decision






47. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






48. Models where firms agree to mutually improve their situation






49. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






50. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur